WTI Crude Oil chart
Just when it appeared that bears were getting the upper hand, the daily bar chart pattern of WTI Crude Oil rallied smartly past its 20 day and 50 day EMAs and the 'support/resistance zone' (between 53 and 55).
The bullish fervour didn't last long. The rally failed to reach its sliding 200 day EMA, and pulled back to the 'support/resistance zone' before bouncing up. Such a pullback usually provides a buying opportunity.
Oil's price needs to close convincingly above the Fibonacci resistance zone between 59 and 63 (which are the 50% and 61.8% retracement levels of the fall from the Oct '18 top of 76 to the Dec '18 low of 42) before bulls can regain control of the chart.
Daily technical indicators are in bullish zones but not showing much upward momentum. MACD is seeking support from its signal line in bullish zone. RSI is above its 50% level. Slow stochastic has fallen from its overbought zone. Some consolidation is likely before oil's price can attempt to move higher.
On longer term weekly chart (not shown), oil's price closed above its 20 week EMA but below its 50 week and 200 week EMAs in long-term bear territory. Weekly technical indicators are looking neutral to bullish. MACD is rising above its signal line in bearish zone. RSI is facing resistance from its 50% level. Slow stochastic has entered its overbought zone.
Brent Crude Oil chart
After receiving good support from its rising 20 day EMA and the 61 level, the daily bar chart pattern of Brent Crude Oil moved smartly above the 'support/resistance zone' between 61 and 63.
Oil's price faced strong resistance from its sliding 200 day EMA, and dropped sharply towards its rising 20 day EMA before bouncing up.
For bulls to regain control of the chart, oil's price needs to close convincingly above the Fibonacci resistance zone between 68 and 72 (which are the 50% and 61.8% retracement levels of the fall from the Oct '18 top of 86 to the Dec '18 low of 50).
Daily technical indicators are in bullish zones but not showing much upward momentum. MACD is seeking support from its rising signal line in bullish zone. RSI is above its 50% level. Slow stochastic has fallen from its overbought zone. Some consolidation is likely before oil's price can attempt to move higher.
On longer term weekly chart (not shown), oil's price closed above its 20 week and 200 week EMAs in long-term bull territory, but is facing resistance from its 50 week EMA. 'Death cross' of the 50 week EMA below the 200 week EMA has been averted for now. Weekly technical indicators are looking bullish to neutral.
FIIs were were net buyers of equity on all three trading days this week. Their total net buying was worth Rs 42.3 Billion. DIIs were net sellers of equity on Mon. and Tue. (Feb 25 and 26), but net buyers today. Their total net selling was worth Rs 24 Billion, as per provisional figures.
India's fiscal deficit (i.e. gap between the government's expenditure and revenue) touched Rs 7.7 Trillion during the Apr '18 - Jan '19 period, exceeding the full year revised target of Rs 6.34 Trillion by more than 21% due to lower revenue collections.
A Reuter's survey of economists forecast that India's GDP growth slipped to 6.9% (annually) during the Oct-Dec '18 quarter. If the forecast proves accurate, it will be the slowest economic growth in five quarters.
Despite strong buying by FIIs, the daily bar chart pattern of Nifty has failed to make much upward progress. The index faced two days of resistance from its 50 day EMA last week, but bounced up above all three EMAs into bull territory on Mon. Feb 25.
An air-strike inside Pakistan by the IAF in the early hours of Tue. was followed by a retaliatory strike by the PAF today. Claims of each side about shooting down of jets have added to the uncertainty of a jittery stock market.
Since markets do not like uncertainty, expect bears to try and get the upper hand during F&O expiry week. Bulls may not concede ground without a fight.
Daily technical indicators are not giving any directional indications. MACD has merged with its falling signal line, and is moving sideways in neutral zone. RSI and Slow stochastic are at their respective 50% levels.
Nifty's TTM P/E has moved down to 26.36, but remains much higher than its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has entered its overbought zone, hinting at more correction.
Chest thumping and fomenting war hysteria has never achieved anything. Escalation of hostilities - should it occur - will hurt the economies of both countries. Till sanity prevails, it may be better for small investors to stay away from the market.
S&P 500 index chart pattern
The following comments were made in last week's post on the daily bar chart pattern of S&P 500: "The 'golden cross' of the 50 day EMA above the 200 day EMA will technically confirm a bull market. Bears may try to prevent that from occurring by defending the 'resistance zone' between 2800 and 2825.."
In a holiday-shortened trading week, the index consolidated sideways with a slight upward bias and gained 0.6% on a weekly closing basis. However, bears defended the 'resistance zone' well and prevented the 'golden cross' for the time being.
Daily technical indicators are looking overbought. MACD is rising above its signal line in overbought zone. RSI is facing resistance from the edge of its overbought zone. Slow stochastic is moving sideways inside its overbought zone, but is showing negative divergence by touching a lower top.
Some more consolidation can be expected before the index makes an attempt to cross above the resistance zone. Satisfactory resolution of the US-China trade spat may provide the necessary incentive to bulls.
On longer term weekly chart (not shown), the index closed above its three weekly EMAs in a long-term bull market for the fourth week in a row. Weekly MACD is rising above its signal line in bearish zone. RSI is rising above its 50% level. Slow stochastic is climbing inside its overbought zone. Some more upside is possible.
FTSE 100 index chart pattern
The pullback rally on the daily bar chart pattern of FTSE 100 stalled at the 200 day EMA. The index consolidated sideways as it struggled to move above the 7200 level, and eventually closed below it with a weekly loss of 0.8%.
Daily technical indicators are correcting overbought conditions. MACD has crossed below its signal line in bullish zone. RSI has dropped down after facing resistance from the edge of its overbought zone. Stochastic has fallen from its overbought zone after re-entering it.
The BrExit negotiations may be headed for a hard landing. Some more index consolidation or correction is likely. (At the time of writing this post, FTSE is trading about 9 points higher.)
On longer term weekly chart (not shown), the index closed above its 20 week and 200 week EMAs in long-term bull territory, but slipped down below its 50 week EMA. Weekly technical indicators are looking bullish. MACD is rising above its signal line in bearish zone. RSI is above its 50% level and Stochastic is inside its overbought zone, but both are showing slight downward momentum.
FIIs were net sellers of equity on Mon. and Tue. (Feb 18 and 19) but turned net buyers on the last three days. Their total net buying was worth Rs 50.3 Billion. DIIs were net buyers of equity on all five trading days. Their total net buying was worth Rs 46.5 Billion, as per provisional figures.
On Fri. Feb 22, net buying by FIIs exceeded Rs 63 Billion, which turned them into net buyers month-to-date. A bulk deal in Kotak Mahindra Bank (ING sold its residual 3% holding) was the probable reason.
Nifty's EPS for Q3 (Dec '18) hit an 11-quarter low of Rs 96.50. This is the first instance since Q1 (Jun '16) when the EPS slipped below Rs 100. It was also the 4th consecutive quarter of lower-than-estimated earnings for the Nifty 50 companies.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex closed below the 200 day EMA on Mon. and Tue. (Feb 18 and 19) after 2 months - thanks mainly to FII selling.
Just when it seemed bears were getting the upper hand, the index pulled back above its 200 day EMA towards the Fibonacci resistance zone (between 36140 and 36810).
Despite strong combined buying by FIIs and DIIs, resistances from the merging 20 day and 50 day EMAs capped the pullback rally.
The index closed above its 200 day EMA in bull territory, but eight straight days of lower closes and the Valentine's Day massacre at Pulwama has dented bullish sentiments.
Daily technical indicators are looking bearish. MACD is moving sideways below its falling signal line in neutral zone. ROC is moving up towards its falling 10 day MA in bearish zone. RSI is sliding down towards its oversold zone. Slow stochastic has emerged from its oversold zone.
The government has been announcing several sops for various sections of citizens in a belated effort to curry favour with voters before the general election. The stock market has so far reacted with indifference.
With no visible bullish triggers on the horizon - monsoon is too far away and Q4 (Mar '19) results of India Inc. are unlikely to be any better - there is a distinct possibility that Sensex may succumb to gravity.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty formed a 'reversal' bar (lower low, higher close) for the 6th time in the past thirteen weeks. Bulls need not expect a strong pullback rally.
The index closed above its 50 week EMA but faced strong resistance from its 20 week EMA. FII buying can cause some more upside, but is unlikely to propel the index above the Fibonacci resistance zone (between 10880 and 11090).
Weekly technical indicators are looking neutral to bearish. MACD, ROC and RSI are moving sideways in neutral zone. Slow stochastic is falling towards its 50% level.
Nifty's TTM P/E has moved down to 26.32, but remains well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has fallen into its overbought zone, and can limit near-term index upside.
Bottomline? For more than 3 months, Sensex and Nifty charts have been consolidating sideways after sharp corrections during Sep-Oct '18. Both indices managed to close above their long-term moving averages in bull territories, but are unlikely to cross above Fibonacci resistance zones. The consolidations may continue with a downward bias.
FIIs were net sellers of equity on Mon. and Tue. (Feb 18 and 19), but net buyers today. Their total net selling was worth Rs 13.4 Billion. DIIs were net buyers of equity on all three trading days this week. Their total net buying was worth Rs 36.1 Billion, as per provisional figures.
Foreign Direct Investment (FDI) in India contracted by 7% to US $33.49 Billion during the Apr-Dec '18 period, compared to US $35.94 Billion during Apr-Dec '17. The decline may put pressure on balance of payments and value of Rupee.
The government has approved a Rs 482 Billion recapitalisation for 12 Public Sector Banks to strengthen their balance sheets and help them to better negotiate RBI's Prompt Corrective Action (PCA) framework.
The following remark was made in last week's technical update on the daily bar chart pattern of Nifty: "Looks like Nifty may be headed below its 200 day EMA towards the lower Bollinger Band."
Six straight days of lower closes - due mainly to FII selling - had dropped the index below its 200 day EMA to the lower Bollinger Band by Fri. Feb 15.
The index continued to fall further, and slipped below the 10600 level intra-day on Tue. Feb 19 - correcting more than 530 points (4.8%) from its Feb 7 top of 11118.
News of PSB recapitalisation triggered short covering by FIIs today. Nifty pulled back to its 200 day EMA, erasing the losses made on Mon. and Tue.
Daily technical indicators are in bearish zones. MACD is below its falling signal line. RSI is below its 50% level, but showing upward momentum. Slow stochastic is inside its oversold zone.
The pullback rally is likely to go past the 200 day EMA. Note that the 20 day SMA (middle band - marked by green dotted line) is merging with the 50 day EMA, and the two together can provide overhead resistance.
Nifty's TTM P/E has moved down to 26.5, but remains much higher than its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is in neutral zone after a sharp fall from its oversold zone, and can limit near-term upside.
The worst may not be over for Nifty. The probability of a fall to 10000 or even lower remains high - despite heavy buying by DIIs. Decreasing inflows into equity mutual funds and uncertainty about outcome of general election are taking a toll on bullish sentiments.
Small investors need not sell in a panic. Neither should they attempt bottom fishing. Sitting on your hands may not be particularly exciting, but can be a good strategy in a volatile and directionless stock market.
Gold chart pattern
Overbought weekly technical indicators led to the following concluding comment in the previous post on the daily bar chart pattern of Gold: "A pullback towards 1300 is a possibility."
The expected pullback touched an intra-day low of 1304.70 on Thu. Feb 14, but bounced up after receiving support from the rising 20 day EMA. Gold's price is trading above its three rising EMAs in a bull market.
Daily technical indicators have corrected overbought conditions, but remain in bullish zones. MACD is below its signal line but its downward momentum has stalled. RSI is moving up towards its overbought zone. Slow stochastic has stopped falling but is not showing any upward momentum yet.
After a sharp rise, the US Dollar index is sliding down a bit. That ought to encourage bulls to push gold's price higher.
On longer term weekly chart (not shown), gold’s price closed above its three weekly EMAs in long-term bull territory for the eighth week in a row. The impending 'golden cross' of the 50 week EMA above the 200 week EMA will technically confirm a return to a long-term bull market. Weekly technical indicators are looking bullish and overbought. Lack of volume support can trigger a consolidation or correction.
Silver chart pattern
The following comments were made in the previous post on the daily bar chart pattern of Silver: "All three daily technical indicators showed negative divergences by touching lower tops, and are showing downward momentum after correcting overbought conditions. Some more correction or consolidation is likely."
Silver's price corrected below its 20 day EMA to touch an intra-day low of 15.45 on Thu. Feb 14, but bounced up after receiving good support from its 50 day EMA.
The 'golden cross' of the 50 day EMA above the 200 day EMA - though not a convincing one yet - has technically confirmed a return to a bull market. Stronger volume support is required for the rally to sustain.
Daily technical indicators are looking neutral to bearish. MACD is falling below its signal line in bullish zone. RSI has bounced up in neutral zone after briefly falling below its 50% level. Slow stochastic is falling below its 50% level, but its downward momentum has weakened.
On longer term weekly chart (not shown), silver's price closed above its 20 week and 50 week EMAs, but below its falling 200 week EMA in a long-term bear market. Weekly technical indicators are in bullish zones. MACD is showing upward momentum. RSI and Slow stochastic are moving sideways.
S&P 500 index chart pattern
The pullback rally from the Dec '18 low on the daily bar chart pattern of SPX 500 received good support from the 200 day EMA, and gathered strength as it climbed along the upper Bollinger Band.
The index is trading above its three EMAs in bull territory. The 'golden cross' of the 50 day EMA above the 200 day EMA will technically confirm a bull market.
Bears may try to prevent that from occurring by defending the 'resistance zone' between 2800 and 2825 - which had proved to be a strong hurdle for bulls back in Oct and Nov '18.
Daily technical indicators are looking overbought. MACD is rising above its signal line in overbought zone. RSI is poised to enter its overbought zone. Slow stochastic has re-entered its overbought zone, but is showing negative divergence by touching a lower top.
Some consolidation around current level is possible before the index makes an attempt to cross above the resistance zone.
On longer term weekly chart (not shown), the index closed above its three weekly EMAs in a long-term bull market for the third week in a row. Weekly MACD is rising above its signal line in bearish zone. RSI has crossed above its 50% level. Slow stochastic has entered its overbought zone.
FTSE 100 index chart pattern
The pullback rally from the Dec '18 low on the daily bar chart pattern of FTSE 100 rose above its 200 day EMA and closed in bull territory after 4 months - gaining 2.3% on a weekly closing basis.
Bulls are winning the battle but are yet to win the war. The 'golden cross' of the 50 day EMA above the 200 day EMA, which will technically confirm a return to a bull market, is still awaited and may take a while.
Daily technical indicators are looking bullish and overbought. MACD is rising above its signal line in bullish zone. RSI is rising towards its overbought zone. Stochastic is moving sideways inside its overbought zone.
RSI and Slow stochastic are showing negative divergences by touching lower tops. Some consolidation or correction is likely.
On longer term weekly chart (not shown), the index closed above its three weekly EMAs in long-term bull territory after more than 6 months. Weekly technical indicators are looking bullish. MACD is rising above its signal line in bearish zone. RSI is rising above its 50% level. Stochastic is rising in its overbought zone, and can trigger a pullback.
FIIs turned bears, and were net sellers of equity on all five trading days. Their total net selling was worth Rs 24.8 Billion. DIIs were also net sellers of equity on Mon. and Tue. (Feb 11 and 12) but turned net buyers on Wed., Thu. and Fri. Their total net buying was worth Rs 24.4 Billion, as per provisional figures.
India's WPI-based inflation in Jan '19 touched a 10 months low of 2.76% - down from 3.8% in Dec '18 and 3.02% in Jan '18. Lower inflation in fuel and manufactured products led to the fall.
Trade deficit in Jan '19 widened to US $14.73 Billion from $13.08 Billion in Dec '18, but was lower than $15.7 Billion in Jan '18. Exports rose by 3.74% while imports grew a meagre 0.01%.
BSE Sensex index chart pattern
Following a failed upward breakout above the Fibonacci resistance zone (between 36140 and 36810), the daily bar chart pattern of Sensex closed lower for six trading days in a row as FIIs turned net sellers of equity.
The index dropped below the Fibonacci resistance zone and tested support from the 200 day EMA. For the fourth time since end-Dec '18, the index breached the 200 day EMA intra-day, but bounced up to close above it in bull territory.
The index has been consolidating sideways with a slight upward bias for the past 3 months, which is evident from the gradually rising long-term moving average. Bulls are trying to regain control of the chart slowly and steadily.
The battle lines are clearly drawn between the two warring sides. A convincing index close above 37000 will give the advantage to bulls. A convincing index close below the 200 day EMA will tip the scales towards bears.
Daily technical indicators are looking neutral to bearish. MACD has crossed below its signal line in neutral zone. ROC is falling below its 10 day MA in bearish zone. RSI is moving sideways along its 50% level. Slow stochastic is falling below its 50% level. A near-term technical bounce is possible.
Q3 (Dec '18) results season is almost over. Another quarter of India Inc.'s tepid earnings growth is not going to help the bullish cause. The Pulwama terror attack and clamour for revenge has added a fresh layer of uncertainty to the stock market.
This may be a good time to realign portfolios and invest in fixed income and ELSS instruments.
NSE Nifty index chart pattern
Thanks to FII selling, the weekly bar chart pattern of Nifty lost more than 200 points (2%) on a weekly closing basis, and closed below the Fibonacci resistance zone (between 10880 and 11090) and its 20 week EMA.
The index breached its 50 week EMA intra-week, but bounced up to close above it for the 12th straight week. The gradually rising 50 week EMA is an indication that bulls are trying to gain ground slowly.
Weekly technical indicators are looking neutral to bearish. MACD is moving sideways above its signal line in neutral zone. ROC has crossed below its rising 10 week MA and dropped to neutral zone. RSI is falling towards its 50% level. Slow stochastic formed a bearish 'rounding top' pattern before falling from its overbought zone.
Nifty's TTM P/E has moved down to 26.53, but remains well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has fallen from its oversold zone. A near-term pullback is possible.
Bottomline? For more than 3 months, Sensex and Nifty charts have been consolidating sideways after sharp corrections during Sep-Oct '18. Both indices are trading above their long-term moving averages in bull territories, but continue to face resistances from the zone between Fibonacci 50% and 61.8% retracement levels. The consolidations may continue till the general elections.
FIIs were net sellers of equity on all three trading days this week. Their total net selling was worth Rs 12.7 Billion. DIIs, who were also net sellers of equity on Mon. and Tue. (Feb 11 and 12), were net buyers today. Their total net buying was worth Rs 3.6 Billion, as per provisional figures.
India's CPI-based retail inflation eased to a 19 months low of 2.05% in Jan '19 from a revised 2.11% in Dec '18, and was much lower than 5.07% in Jan '18. Negative food inflation was the main reason for the low inflation number.
IIP (factory output) showed a 2.4% growth in Dec '18 from 0.3% in Nov '18. IIP was 8.4% in Oct '18. For the Apr-Dec '18 period, IIP growth was 4.6% over Apr-Dec '17.
The following remark was made in last week's technical update on the daily bar chart pattern of Nifty: "A convincing close above 11090 - which is the Fibonacci 61.8% retracement level of the 1756 points correction from the Aug '18 top of 11760 to the Oct '18 low of 10004 - will put bulls firmly in control of Nifty's chart."
On Wed. Feb 6, the index had closed at 11062.50 - just above the upper Bollinger Band. The next day, it touched an intra-day high of 11118, but formed a 'doji' candlestick by closing at 11069.
Failure to close above 11090 despite two successive attempts, combined with piercing of the upper Bollinger Band followed by a 'doji' formation gave a clear indication that the intermediate rally from the Jan 29 low of 10583.65 was coming to an end.
FIIs, who had led the intermediate rally, turned bears. So did DIIs. Their combined selling has dropped the index below its 20 day SMA (middle band - marked by blue dotted line) and 50 day EMA. Looks like Nifty may be headed below its 200 day EMA towards the lower Bollinger Band.
Daily technical indicators are looking bearish and showing downward momentum. MACD has crossed below its signal line in bullish zone. RSI and Slow stochastic have slipped below their respective 50% levels in neutral zone. Some more downside is likely.
Nifty's TTM P/E has moved down to 26.6, after touching 27.41 on Feb 7 (its highest level in 2019) - but remains much higher than its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is oscillating inside oversold zone - hinting at some more near-term downside.
Shares of companies declaring Q3 results below expectations are getting hammered by bears even if they are making profits. A handful of companies whose results have surprised positively have seen their stock prices going through the roof.
The environment is not conducive for small investors to make much money. Mid-cap and small-cap stocks continue to bear the brunt of bear attacks. Even large-caps are tumbling down. Market volatility is unlikely to abate before elections.
With bank fixed deposit rates likely to fall after the RBI rate cut, locking some money into medium term FDs may be a good idea.
WTI Crude Oil chart
The daily bar chart pattern of WTI Crude Oil touched an intra-day high of 55.75 on Feb 4 - its highest level in nearly 3 months - but formed a 'reversal day' bar (higher high, lower close) that brought bears to the fore.
Oil's price corrected below its converging 20 day and 50 day EMAs and closed below the 'Support/Resistance zone' (between 53 and 55) that is proving to be a tough hurdle for bulls.
Daily technical indicators are looking bearish. MACD has crossed below its signal line after forming a 'rounding top' reversal pattern in bullish zone. RSI has slipped below its 50% level in neutral zone. Slow stochastic is falling below its 50% level.
Some more correction or consolidation is likely.
On longer term weekly chart (not shown), oil's price faced strong resistance from its falling 20 week EMA and dropped to close well below its three weekly EMAs in long-term bear territory. Weekly technical indicators are looking neutral to bearish.
Brent Crude Oil chart
The daily bar chart pattern of Brent Crude Oil touched an intra-day high of 63.63 on Feb 4 - its highest level in 2 months - but formed a 'reversal day' bar (higher high, lower close) that poured cold water on bullish hopes.
Oil's price has been consolidating sideways with a downward bias since then, and closed inside the 'Support/Resistance zone' (between 61 and 63) that bulls are finding very difficult to overcome.
Daily technical indicators are looking bearish to neutral. MACD is moving sideways in bullish zone and has merged with its signal line. RSI is sliding down towards its 50% level. Slow stochastic is falling towards its 50% level.
Expect some more consolidation or correction.
On longer term weekly chart (not shown), oil's price closed below its three weekly EMAs in long-term bear territory. 'Death cross' of the 50 week EMA below the 200 week EMA will technically confirm a long-term bear market. Weekly technical indicators are looking bearish to neutral.
S&P 500 index chart pattern
The daily bar chart pattern of S&P 500 crossed above the Fibonacci resistance zone between 2640 and 2710 (marked by grey rectangle - refer last week's post) on Mon. Feb 4, and continued its climb along the upper Bollinger Band the next day.
Strong resistance from the 200 day SMA halted further progress of the rally. The index dropped back inside the resistance zone - closing flat for the week.
As long as the index remains above its 20 day SMA (middle band - marked by green dotted line), bulls will endeavour to charge past the 200 day SMA.
Daily technical indicators are correcting overbought conditions, but remain in bullsih zones. MACD and RSI are moving down after facing resistances from the edges of their respective overbought zones. Slow stochastic is about to drop from its overbought zone.
Some more correction or consolidation around current level is likely.
On longer term weekly chart (not shown), the index closed above its three weekly EMAs for the second week in a row, but formed a 'doji' candlestick that often signals a reversal of direction. Weekly MACD has crossed above its signal line in bearish zone. RSI is moving sideways along its 50% level. Slow stochastic is rising towards its overbought zone.
FTSE 100 index chart pattern
The daily bar chart pattern of FTSE 100 touched an intra-day low of 7002 on Mon. Feb 4, but soared past the 7100 level to touch an intra-day high of 7181 the next day.
Strong resistance from the falling 200 day EMA prevented further upward progress. Bears stepped in to 'sell on rise'. The index closed below 7100 for the week, but gained 0.7% on a weekly closing basis.
Daily technical indicators are correcting overbought conditions. MACD is above its signal line in bullish zone, but has stopped rising. RSI has turned down after facing resistance from the edge of its overbought zone. Stochastic has dropped down from its overbought zone.
Some consolidation or correction is likely before the index makes another attempt to cross above its 200 day EMA. (At the time of writing this post, the index is trading above 7130.)
On longer term weekly chart (not shown), the index faced strong resistance from its 50 week EMA and dropped down to close below 7100, but stayed above its 20 week and 200 week EMAs in long-term bull territory. Weekly technical indicators are looking bullish. MACD is rising above its signal line in bearish zone. RSI is about to cross above its 50% level. Stochastic has entered its overbought zone.
FIIs were net sellers of equity on Mon. (Feb 4) but net buyers on the other four trading days. Their total net buying was worth Rs 22.6 Billion. DIIs were net buyers of equity on Tue., Wed. and Thu. (Feb 5, 6 and 7) but net sellers on Mon. and Fri. Their total net selling was worth Rs 116 Million, as per provisional figures.
Sluggish returns, market volatility and political uncertainty are affecting inflows into equity mutual funds in India. Inflows in Jan '19 dropped to Rs 61.6 Billion from Rs 66.1 Billion in Dec '18 and Rs 84.1 Billion in Nov '18.
As many as 363 infrastructure projects, each worth Rs 1.5 Billion or more, have incurred cost over-runs of over Rs 3.42 Trillion due to delays in land acquisitions, forest clearance and supply of equipment.
BSE Sensex index chart pattern
The following comments were made in last week's post on the daily bar chart pattern of Sensex: "All four technical indicators are showing negative divergences by touching lower tops. Bears can be expected to fight to defend the 36810 level."
Strong buying by FIIs and DIIs caused the index to breakout and close above the Fibonacci resistance zone between 36140 and 36810 on Wed. Feb 6. Though it closed above 36810 for a second day, the index formed a small 'reversal day' bar (higher high, lower close).
Bears decided enough was enough. Profit booking pulled the index back inside the Fibonacci resistance zone on Fri. Feb 8. Bulls failed to regain control of the chart, as the upward breakout above 36810 turned out to be a false breakout.
Despite the sharp correction of more than 400 points on Fri., the index eked out a 0.2% gain on a weekly closing basis, and closed above its three daily EMAs in bull territory.
Daily technical indicators are turning bearish. MACD is falling towards its signal line in bullish zone. ROC is falling towards its 10 day MA in bullish zone. RSI is seeking support from its 50% level. Slow stochastic is about to drop from its overbought zone. Some more correction seems likely.
The index had rallied on rumours of an interest rate cut by the RBI at its monetary policy meeting on Thu. Feb 7. The actual rate cut triggered a sell-off, as there was little follow-up buying due to weak corporate Q3 earnings.
FIIs have been net buyers this month. If they continue buying, bullish sentiment may revive.
NSE Nifty index chart pattern
Combined buying by FIIs and DIIs caused the weekly bar chart pattern of Nifty to breakout above the Fibonacci resistance zone intra-week. Absence of follow-up buying and profit booking pulled Nifty back inside the resistance zone by Fri. Feb 8.
The index breached the 11000 level after 4 months but failed to sustain above that psychological level. It closed above its two weekly EMAs in bull territory, with a 0.4% weekly gain.
Weekly technical indicators are turning bearish. MACD is moving above its signal line in neutral zone. ROC has crossed below its rising 10 week MA and dropped to neutral zone. RSI has turned down after facing resistance from the edge of its overbought zone. Slow stochastic is poised to fall from its overbought zone.
Nifty's TTM P/E has moved up to 27.10, which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is falling inside oversold zone. Some consolidation or correction is likely.
Bottomline? For more than 3 months, Sensex and Nifty charts have been retracing the sharp corrections during Sep-Oct '18. Both indices are trading above their long-term moving averages in bull territories, but are continuing to face resistances from the zone between Fibonacci 50% and 61.8% retracement levels. Repeated failures of upward breakouts may be tipping the balance towards bears.
